Pirelli profits up after increasing premium segment activities in 2014

Reporting what looks likely to be its last full year results before ChemChina takes control, Pirelli has confirmed marginally improved financial data in its tyre business for the full year 2014. EBIT rose 4.5 per cent to 852.6 million euros (815.7 million euros in 2013), though revenues were marginally down (0.4 per cent) to 6,007.5 million euros. Total net profit was up 8.6 per cent to 332.8 million euros (versus 306.5 million euros in 2013).

In terms of volumes (up 2.0 per cent in total), Pirelli has continued its focus on the premium segment, up 17.8 per cent, while consumer volumes also rose (5.0 per cent). Premium revenues grew to 2,536,0 million euros, with organic growth at 13.2 per cent (11.5 per cent allowing for the effects of forex), making the segment 55 per cent of consumer revenues (up 4.2 per cent compared to 2013). Industrial volumes were 6.5 per cent down, mainly due to a slowing South American market. Pirelli said the industrial annual profitability trend reflects a 6.5 per cent fall in volumes, mainly in emerging markets.

The board said it would propose the distribution of a dividend of 0.367 euro per ordinary share (0.32 prior year) and 0.431euro per savings share (0.39 euro prior year) at the shareholders’ meeting.

Pirelli also confirmed its 2015 targets, with total revenues forecast to grow by 6.0-6.5 per cent to approximately 6.4 billion euros. The manufacturer expects volumes up by 3.0 per cent, with premium the development driver at 10.0 per cent growth or higher.

Camfin statement and other details

Pirelli said that the independent directors and board of directors would be called upon to make regarding ChemChina’s public tender offer when it is launched, with the Board of Directors noting the friendly nature of the operation. It said the characteristics of the bid are consistent with the strategy in the industrial sector which already foresaw paths of growth and aggregation in geographically strategic areas like Asia.

The Pirelli Board of Directors characterised 2014 as yielding “growth above expectations of the premium segment,” which it says strengthened its position “in all main geographical areas, in particular Apac.” Pirelli added that its positive performance in the Apac, Europa and Nafta areas, with respective revenue growth of 17.5 per cent (Apac) and approximately 5 per cent in Europe and Nafta, “attenuated the effects of the slowdown in the South American market.” The board also noted the turnaround of the business in Russia and improvement in the MEAI area, with “improved” product mix and positive “mid-single-digit” profitability from “negative” in 2013.

Pirelli added that the sale of its steelcord activities, with the business classified as a “discontinued operation” in the full year report, had contributed to an improvement in the net financial position, which at 31 December 2014 was 979.6 million euros.

The manufacturer’s investments in research and development were 205.5 million euros (3.4 per cent of sales), of which 174.5 million euros were linked to premium products (6.9 per cent) of the segment’s sales. It also argued that it had made “significant steps towards the achievement of the group’s sustainability goals.” Green performance tyres represented about 46 per cent of total sales, reducing the specific drawing of water by 19 per cent, energy consumption by three per cent and CO2 emissions by two per cent. Pirelli was included in the Dow Jones Sustainability Index, where the group has led the ATX Auto Components sector for eight consecutive years, the FTSE4Good Index, in which it earned a score of 100/100, and the Carbon Disclosure Leadership Index, in which it beat all competitors.

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